[UPDATE] The continued impact of vehicle part shortages on accident repairs

It’s been a perfect storm: pandemic-triggered supply chain issues causing shuttered factories and backed-up ports, plus transportation, infrastructure, and staffing issues. The wreckage: automotive parts shortages now exacerbated by pent-up demand. 

These shortages vary by type of part and vehicle make and model. The length of delays runs the gamut from days to weeks to months or even multiple months. 

Factors contributing to the shortage in the auto industry 

• Dependence on regions like China, the Middle East, and Ukraine for component production. 
• Global supply chain disruptions attributed to the situation in the Ukraine and Russia. While Russia is a major supplier of oil and gas, the Ukraine is a supplier of human resources to the automotive industry and a manufacturer of primary parts like the electrical harnesses of some of the top vehicle models in the world. 
• Manufacturers are still facing semiconductor chip shortages. As people have returned to work and resumed their normal activities, the demand for vehicles has increased, leading to a surge in sales. To make matters worse, manufacturers are prioritizing new car production. This increased demand has put pressure on the supply of auto parts, making it more difficult to obtain the necessary components for repairs and maintenance. 
• Even without the chip famine, other problems have recently plagued the automotive supply chain. There’s a scarcity of raw materials like steel, aluminium, rubber, and thermoplastic resin, resulting in volatile pricing and poor parts availability. 
• Airlines have placed restrictions on the size and weight of packages allowed for airfreight. Packages weighing more than 200kg or more than 0.6 cubic meters in size are not being accepted as cargo. This is being done to maximize the amount of cargo per flight. 
• Availability of sea containers. Shipping lines are reserving containers for their bigger customers. 
• Certain component suppliers in Europe, Japan and Thailand cannot meet demand, causing delays of several weeks before orders can be allocated. 

Logistics challenges: Air and sea freight restrictions

The widening instability in the Middle East with the Red Sea shipping channel under attack has upset the supply chain, with shipping companies electing to reroute their shipments around the Cape of Good Hope. This factor alone could lead to reprioritizing of supply of items and shortages of components. 

According to the latest data from the International Monetary Fund (IMF) over the first two months of 2024, maritime trade traffic decreased by 50% year-on-year in the Suez Canal and the Panama Canal has decreased by 32% year-on-year. As a result, there has been at least a 74% increase in maritime traffic at the Cape of Good Hope year-on-year.” But South African ports are struggling to cope with this increase in maritime traffic. For example, in February this year, almost 100 cargo vessels, laden with fuel, bulk dry goods, containers, and cars, were held up at the country’s two largest ports, facing delays attributed to a combination of adverse weather conditions, ageing terminal equipment and poor port management.  

Add to this a crumbling South African road infrastructure and a dysfunctional rail system, and it’s easy to understand why automotive parts supply lines are down to a trickle. 

Congestion at South African sea ports has resulted in several shipping companies bypassing South Africa and transhipping containers to other African ports, which adds four to eight weeks to the provided ETA’s. 

Direct impact on the vehicle repair industry

The vehicle insurance industry is directly impacted by all these factors as there is an extended delay in the repair time of vehicles for most brands. 

The direct impact on the vehicle repair industry is that it takes a long time for vehicle parts to be sourced from overseas. Local manufacturers are not able to provide spare parts as quickly as in the past, resulting in damaged vehicles being required to be driven for longer periods before it can be taken in for repairs. Furthermore, vehicles that are not drivable are gathering dust at storage yards or at repairers. Customers are forced to rent replacement vehicles to continue with their daily responsibilities, or to ensure that their business continues. 

Mitigation strategies for businesses

Preventative measures to mitigate this problem should form part of your normal business risk management programme. 

What you can do to mitigate the problem: 

• Report all insured incidents such as stolen vehicles, accident damaged vehicles and windscreen damage to your insurer as soon as possible. This will ensure that repairs can commence without unnecessary delay. 
• Review the car hire cover in terms of your existing insurance policy. If you do not have the cover, we advise you to reconsider your position in this regard. If you do have car hire cover, we advise you to consider extending the rental period to ensure that it is adequate. Your broker can source the necessary quotation for the rental cover from the Insurers. 
• If a vehicle is still drivable after an incident (and safe to do so), we recommend you to only book the vehicle in for repairs once you have received confirmation that all the necessary parts have been sourced. 
• We also advise you to inform your operational structure about this potential delay to ensure that the necessary controls are put in place to ensure an uninterrupted service to your customers. 

If you have any concerns or require any assistance in this regard, please do not hesitate to contact your broker.